Not a choice anymore? Why borrowing is becoming a necessity in Kenya

In the face of Kenya’s reportedly high cost of living, a notable shift in the way consumers are managing the situation is emerging.

Traditionally, during tough economic times, Kenyans have relied heavily on reducing expenditures, particularly on non-essential items, as a coping strategy.

However, the latest Money March report by digital lender Tala suggests a significant change.

As the rising cost of living continues to strain household budgets, the report shows individuals are increasingly turning towards loans to sustain their livelihoods as there is not much left to cut down expenditure on.

As the cost of living continues to rise and put pressure on household budgets, the report indicates that more individuals are resorting to loans to maintain their livelihoods, as there is little to nothing left to reduce in terms of spending.

This is while they overlook the risks that come with borrowing during such times.

The report shows the most common and traditional trend of cutting down on expenditures recorded a decline, as 59 per cent of the respondents indicated they would cut down on expenditures this year.

This from 72 per cent last year, representing a 13 per cent shrink.

Conversely, the proportion of those backing the new trend of borrowing more to stay afloat grew from 27 per cent last year to 46 per cent this year, a 19 per cent jump.

Those opting to start a new business as a coping strategy also recorded an increase, from 34 per cent last year to 51 per cent.

Teddy Kahiro, research manager at Tala, reiterated that a majority of the Kenyans driving the shift indicated the persistently high cost of living has left almost nothing for them to cut down on.

“This then raises the question of whether borrowing is now becoming a necessity for most Kenyans,” Kahiro said.

Increased borrowing

Generally, the report says slightly over one-third of Kenyans have increased their borrowing, a trend that aligns with rising living costs and delays in income.

Annstella Mumbi, the general manager of Tala-Kenya, said business expenses, education, and day-to-day living needs are the top three reasons for borrowing, with about 80 per cent of borrowers confident in their ability to repay their loans.

Other Topics To Read

• Headlines
• High cost of living
• kenya cost of living
• digital loans
• cost of living kenya
• Not a choice anymore? Why borrowing is becoming a necessity in Kenya
• Business

“When asked about their future, respondents indicated that business and home ownership are their top financial goals for the next five years,” Mumbi said.

Notably, a significant number of respondents reported setting aside 11 to 20 per cent of their income for investments, mainly in savings, SACCOs and chamas.

“Their investments are primarily driven by the desire to grow wealth, start or expand a business and plan for retirement,” Mumbi added.

Of note, fear of loss and a lack of trust in investment platforms were cited as challenges preventing Kenyans from saving and investing more.

The report further highlights that business ownership has increased by seven per cent in 2025, while full-time employment as the main source of income has declined by five per cent year-on-year.

Additionally, It notes that Kenyans in both full-time and part-time employment have pursued fewer ventures that generate secondary income, as the rising cost of living reduces funds that would normally be invested in side hustles.

Compared to 2023 and 2024, the trend of high cost of living continues to be a running theme with 9 in 10 of Kenyans surveyed reporting financial challenges over the past six months and 32 percent feeling stressed about their financial situations.

However, similarly to last year, the sentiment about financial well-being remains optimistic, Kenyans are resilient.

Approximately 46 per cent of respondents said they feel positive about their financial futures this year.